NEW DELHI: After cracking the whip on Central and State public-sector enterprises, the Ministry of Micro, Small and Medium Enterprises on Monday directed large private firms to clear their dues to small businesses on priority.
Citing legal provisions under MSME Development Act, the Nitin Gadkari-led ministry shot off letters to the heads of 500 big companies seeking immediate release of funds to the cash-starved vendors as the 75-day lockdown tipped them over the edge.
Many MSMEs are struggling to keep business afloat amid no demand and consumers conserving cash in an uncertain world.“Many MSMEs are doing business with big corporate groups. However, the payments are not coming from buyers and users of their goods and services. These payments are very important for MSME operations, sustenance of jobs and other economic activities at the grassroots level. This will ultimately benefit the entire economy,” the MSME ministry said.
While the exact quantum of money owed to MSMEs is not readily available, the government-run MSME Samadhaan website, meant to monitor delayed payments to the MSME sector, shows that 54,241 cases involving dues of Rs 15,846 crore have been filed by MSMEs in facilitation / arbitration councils so far.
Out of this, 3,910 cases with dues of Rs 715.4 crore have been settled while 21,462 are scheduled to be heard after 15 days. Also, 9,314 applications have been rejected while 4,764 have been settled with the buyer. Central public sector firms owe a whopping Rs 2,650.63 crore to MSMEs while state PSUs collectively owe Rs 1,608.92 crore.
“Around Rs 10,000 crore has been paid by CPSEs,” the MSME ministry said, while urging states to clear payments pronto.
The ministry now plans to take up the matter with other big firms through social media. It reminded corporates that they are mandated to file half-yearly returns with the corporate affairs ministry on their MSME dues.
The ministry also asked entities having more than Rs 500 crore turnover to come on board the Trade Receivables Discounting System (TReDS) to improve cash flow to MSMEs. TReDS is an online platform that facilitates financing of trade receivables of MSMEs through multiple financiers.
What the law says?
According to the MSME Development Act, 2006, dues to MSMEs must be cleared within 45 days of the acceptance of the goods /service rendered.